This
section is a summary providing a brief outline of Australian taxes.
It should not be considered as being formal tax advice and each
person’s or corporations specific situation should be referred
to a qualified taxation practitioner such as a lawyer or an accountant
holding a current Australian practising certificate.
An Australian company (which is a deemed resident) or an Australian
resident individual, is liable to pay Australian tax on all of its
worldwide assessable income less allowable deductions. Foreign tax
credits are allowable where provided for.
Income Tax Returns are lodged for each year ending 30 June. Unless
they are prepared by a Registered Tax Agent, they must be lodged
by 31 October in each year. If an Australian company is a subsidiary
of an overseas company, a substituted accounting period may be granted,
upon application, by the Australian Taxation Office (“ATO”)
to unify its year end with that of its overseas parent company.
Corporate Income Tax
Income Tax
The general corporate tax rate is 30%
Capital Gains Tax
Capital assets held by an Australian resident company will generally
be liable for tax on any capital gain on their disposal at the corporate
tax rate, i.e. 30%
Dividends Paid by an Australian
Company
If fully franked dividends (i.e. dividends derived from profits
on which Australian corporate tax has been paid) are paid by an
Australian subsidiary to its foreign parent, no dividend withholding
tax is payable. To the extent that dividends are unfranked, dividend
withholding tax of 30% (or as reduced under the relevant double
tax treaty) is payable on the gross unfranked amount.
Debt Funding of an Australian Company
Interest withholding tax of 10% is imposed on interest paid by
an Australian company to a foreign non-resident lender entity. If,
however, the beneficial owner of the interest has a permanent establishment
in Australia and the interest is effectively connected with the
permanent establishment, such interest is taxable by assessment
in Australia.
Royalties Payable to a Foreign
Company
If an Australian company pays royalties to a foreign resident,
the royalties will be subject to royalty withholding tax at the
rate of 30% (or as reduced under the relevant double tax treaty)
and may give rise to transfer pricing issues.
Transfer Pricing
Australian transfer pricing rules are quite stringent and are a
major issue with the Australian Taxation Office.
In most cases related party cross-border transactions are required
to be disclosed to the Tax Authorities on filing of a tax return.
Australia adopts the arm’s length concept as promulgated by
the OECD.
Personal Tax
Residents of Australia are subject to Australian income tax on
their worldwide income and capital gains.
Personal Income Tax Rates:
Resident individuals
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Up
to $6,000 |
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0% |
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$6,001
to $21,600 |
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Tax
is 15% of the part over $6,000 |
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$21,601
to $63,000 |
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$2,340
+ 30% of the part over $21,600 |
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$63,001
to $95,000 |
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$14,760
+ 42% of the part over $63,000 |
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$95,001
and over |
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$28,200
+ 47% of the part over $95,000 |
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Non-resident individuals
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Up
to $21,600 |
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29%
on the lot |
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$21,601
to $63,000 |
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$6,264
+ 30% of the part over $21,600 |
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$63,001
to $95,000 |
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$18,684
+ 42% of the part over $63,000 |
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$95,001
and over |
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$32,124
+ 47% of the part over $95,000 |
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 Medicare
is Australia’s universal health insurance scheme. Contributions
to the health care system are made through taxes and a Medicare
Levy. The levy is 1.5% of taxable income or 2.5% if private hospital
insurance is not maintained by higher income earners. An exemption
from the Medicare levy is available to expatriates, low income earners,
and some other taxpayers meeting certain requirements.
residents
may be subject to an accruals taxation system in respect of investments
in certain foreign trusts, controlled offshore companies and interests
in certain foreign investment funds and foreign life assurance policies.
Generally, expatriates are exempt from this regime for the first
four years of their time in Australia.
there is
a requirement for each employer to make a compulsory contribution
into an Australian approved retirement fund on behalf of each employee
(excluding certain senior expatriate executives). The amount is
currently 9% of salary.
Fringe Benefits Tax
This tax applies to most non-cash benefits provided by an employer
to an employee or an associate of an employee, previous employee
or future employee.
The main areas generally affected by this tax are motor vehicles
provided to employees, low or no interest loans, payment or reimbursement
of private expenses.
Fringe benefits are not taxable in the employee’s hands.
Instead, a separate tax collection procedure applies to fringe benefits,
known as Fringe Benefits Tax (FBT), which is levied on the employer
at the highest marginal tax rate.
Net Capital Gains
Capital gains that have been derived on the disposal by sale, or
otherwise, of assets acquired after 19 September 1985 are generally
included in assessable income. Effective 21 September 1999, where
the asset is held for more than 12 months (from the later of the
date of entry to Australia or date of acquisition) only 50% of the
net capital gain is assessable. There are no special rules that
apply to valuation of assets for capital gains tax where an individual
becomes a tax resident for the first time. The aim is to generally
not tax any capital appreciation arising before becoming an Australian
tax resident. Also, the disposal of a principal residence is generally
not subject to capital gains tax.
Other Taxes
Goods & Service Tax (“GST”)
A broad based goods and services tax (GST) has applied in Australia
since 1 July 2000. The GST is based on the value added tax (VAT)
model adopted in most countries around the World. Its effect is
a tax of 10% on the consumption of most goods, services and property
in Australia, including those that are imported, but generally it
will not apply to exports of goods or services consumed outside
Australia.
Land Tax
Land Tax is levied by each State Government and the Australian
Capital Territory on the unimproved capital value of the land at
varying rates that increase according to the value of the property.
Usually the land tax liability arises for land owned at a particular
date, which in New South Wales, is at midnight on 31 December in
each year.
Payroll Tax
Payroll Tax is levied on employers. This is a State tax, and the
rates vary between the States, as do the rules regarding exactly
what income is liable to Payroll Tax. The current New South Wales
rate of payroll tax is 6.0%. This applies whether or not an individual
is paid from a foreign or from a local payroll.
There are exemptions for small payrolls. Currently in New South
Wales the exemption level is $600,000.
Inheritance Tax
There are effectively no inheritance taxes.
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